shift-share analysis (mix and share analysis) chapter 7, pages 67-73 in textbook

Shift-Share Analysis (Mix and Share Analysis)

Chapter 7, pages 67-73 in textbook

What is Shift-Share Analysis?

One way to account for a region’s competitiveness Provides a picture of how well a region’s mix of

industries is performing Also, shows how well individual industries are

doing Can be used to analyze individual industries or the

whole economy


Breaks down regional employment growth into three components:

National share (NS) Industry mix (IM) Regional shift (RS)


National Share (NS) Component Share of regional job growth attributable to growth of the national

economy “If the regional industry grew at the industry’s national growth rate,

what would be the result?”

=tirNS ×−1t

irE ⎟⎟⎠

⎞⎜⎜⎝

⎛−− 1

1tUS

tUS

E

E

Where:t = current time period t-1 = one year agoi = specific industry r = specific region


Industry Mix (IM) Component How much growth can be attributed to the region’s mix of industries? Also estimates how many jobs were created/not created in each

industry due to differences in industry and total national growth rates

×−1tirE=t

irIM ⎥⎦

⎤⎢⎣

⎡⎟⎟⎠

⎞⎜⎜⎝

⎛−⎟⎟

⎠

⎞⎜⎜⎝

⎛−− 11 tUS

tUS

tiUS

tiUS

E

E

E

E



Regional Shift (RS) Component How many jobs are created/not created as a result of the region’s

competitiveness? Perhaps the most important component Identifies the region’s leading and lagging industries

×−1tirE


=tirRS ⎥

⎦

⎤⎢⎣

⎡⎟⎟⎠

⎞⎜⎜⎝

⎛−⎟⎟

⎠

⎞⎜⎜⎝

⎛−− 11 tiUS

tiUS

tir

tir

E

E

E

E

A Shift-Share Example

Compare a county to the U.S. economy. We’ll use 1993 and 1998 with total employment

divided into six sectors. Rule of thumb is to use two time periods 5 or

fewer years apart. Analysis can be quite different for different time

periods.


National total employment and by major industry sector, 1993 – 1998.

United States Change in Percent1993 1998 Jobs Change

Total Employment 141,996,000 160,199,000 18,203,000 Farm 3,130,000 3,127,000 -3,000 Manufacturing 18,712,000 19,569,000 857,000 Retail 23,467,000 26,710,000 3,243,000 Finance and Real Estate 10,502,000 12,230,000 1,728,000 Service 41,811,000 49,898,000 8,087,000 All other 44,375,000 48,665,000 4,290,000


Calculate the percentage change in U.S. total employment and by industry sector.

United States Change in Percent1993 1998 Jobs Change

Total Employment 141,996,000 160,199,000 18,203,000 12.8% Farm 3,130,000 3,127,000 -3,000 -0.1% Manufacturing 18,712,000 19,569,000 857,000 4.6% Retail 23,467,000 26,710,000 3,243,000 13.8% Finance and Real Estate 10,502,000 12,230,000 1,728,000 16.5% Service 41,811,000 49,898,000 8,087,000 19.3% All other 44,375,000 48,665,000 4,290,000 9.7%


County total employment and by major industry sector, 1993 – 1998.

A County Change in Percent1993 1998 Jobs Change

Total Employment 253,463 283,417 29,954 Farm 7,951 7,977 26 Manufacturing 58,516 61,229 2,713 Retail 44,752 50,339 5,587 Finance and Real Estate 16,193 18,547 2,354 Service 62,518 75,441 12,923 All other 63,533 69,884 6,351


Calculate the percentage change in the county’s total employment and by industry sector.

A County Change in Percent1993 1998 Jobs Change

Total Employment 253,463 283,417 29,954 11.8% Farm 7,951 7,977 26 0.3% Manufacturing 58,516 61,229 2,713 4.6% Retail 44,752 50,339 5,587 12.5% Finance and Real Estate 16,193 18,547 2,354 14.5% Service 62,518 75,441 12,923 20.7% All other 63,533 69,884 6,351 10.0%


Calculating the NS component.

1993 U.S. National Industry County Emp Growth Rate Growth Share Farm 7,951 Manufacturing 58,516 Retail 44,752 Finance and Real Estate 16,193 Service 62,518 All other 63,533County National Growth Share =


Calculating the NS component.

1993 U.S. National Industry County Emp Growth Rate Growth Share Farm 7,951 12.8% Manufacturing 58,516 12.8% Retail 44,752 12.8% Finance and Real Estate 16,193 12.8% Service 62,518 12.8% All other 63,533 12.8%County National Growth Share =


If the county’s industries grew at the overall national rate of growth new job growth would have been 32,492 between 1993 and 1998.

1993 U.S. National Industry County Emp Growth Rate Growth Share Farm 7,951 12.8% 1,019 Manufacturing 58,516 12.8% 7,501 Retail 44,752 12.8% 5,737 Finance and Real Estate 16,193 12.8% 2,076 Service 62,518 12.8% 8,014 All other 63,533 12.8% 8,145County National Growth Share = 32,492

Ex: 7,951 * ((160,199,000/141,996,000)-1) = 1,019


Calculating the IM component.

Industry's1993 National U.S. Industry Mix

Industry County Emp Growth Rate Growth Rate Share Farm 7,951 Manufacturing 58,516 Retail 44,752 Finance and Real Estate 16,193 Service 62,518 All other 63,533County Industry Mix Share =




Industry County Emp Growth Rate Growth Rate Share Farm 7,951 -0.1% Manufacturing 58,516 4.6% Retail 44,752 13.8% Finance and Real Estate 16,193 16.5% Service 62,518 19.3% All other 63,533 9.7%County Industry Mix Share =




Industry County Emp Growth Rate Growth Rate Share Farm 7,951 -0.1% 12.8% Manufacturing 58,516 4.6% 12.8% Retail 44,752 13.8% 12.8% Finance and Real Estate 16,193 16.5% 12.8% Service 62,518 19.3% 12.8% All other 63,533 9.7% 12.8%County Industry Mix Share =


The industrial mix component of –2,737 means that the county has nearly 2,800 fewer jobs than it would have had if its structure were identical to the nation’s.


Industry County Emp Growth Rate Growth Rate Share Farm 7,951 -0.1% 12.8% -1,027 Manufacturing 58,516 4.6% 12.8% -4,821 Retail 44,752 13.8% 12.8% 448 Finance and Real Estate 16,193 16.5% 12.8% 589 Service 62,518 19.3% 12.8% 4,078 All other 63,533 9.7% 12.8% -2,002County Industry Mix Share = -2,737

Ex: 7,951 * ((3,127/3,130)-1) – ((160,199/141,996)-1)) = -1,027


Calculating the RS component.

County's Industry's1993 Industry National Regional

Industry County Emp Growth Rate Growth Rate Shift Farm 7,951 Manufacturing 58,516 Retail 44,752 Finance and Real Estate 16,193 Service 62,518 All other 63,533County Local Share =




Industry County Emp Growth Rate Growth Rate Shift Farm 7,951 0.3% Manufacturing 58,516 4.6% Retail 44,752 12.5% Finance and Real Estate 16,193 14.5% Service 62,518 20.7% All other 63,533 10.0%County Local Share =




Industry County Emp Growth Rate Growth Rate Shift Farm 7,951 0.3% -0.1% Manufacturing 58,516 4.6% 4.6% Retail 44,752 12.5% 13.8% Finance and Real Estate 16,193 14.5% 16.5% Service 62,518 20.7% 19.3% All other 63,533 10.0% 9.7%County Local Share =


The regional shift component shows that 199 new jobs in the county are attributable to its relative competitive position. This is primarily due to its high-growth of service employment.


Industry County Emp Growth Rate Growth Rate Shift Farm 7,951 0.3% -0.1% 34 Manufacturing 58,516 4.6% 4.6% 33 Retail 44,752 12.5% 13.8% -597 Finance and Real Estate 16,193 14.5% 16.5% -310 Service 62,518 20.7% 19.3% 831 All other 63,533 10.0% 9.7% 209County Local Share = 199

Ex: 7,951 * (((7,977/7,951)-1) - ((3,127/3,130)-1)) = 34


Adding it all up Make sure your math is correct by adding the three

components. They should total the actual change in employment

for the region

Eir = IMtir + NSt

ir + RStir

Shift Share Lab

Calculate NS, IM, and RS for each industry and make sure that total employment change in the region is equal to the sum of the three total components.

Identify the SICs with positive IM and RS values and among those, which ones have RS>IM.

=tirNS ×−1t

irE ⎟⎟⎠

⎞⎜⎜⎝

⎛−− 1

1tUS

tUS

E

E

×−1tirE=t

irIM ⎥⎦

⎤⎢⎣

⎡⎟⎟⎠

⎞⎜⎜⎝

⎛−⎟⎟

⎠

⎞⎜⎜⎝

⎛−− 11 tUS

tUS

tiUS

tiUS

E

E

E

E

×−1tirE=t

irRS ⎥⎦

⎤⎢⎣

⎡⎟⎟⎠

⎞⎜⎜⎝

⎛−⎟⎟

⎠

⎞⎜⎜⎝

⎛−− 11 tiUS

tiUS

tir

tir

E

E

E

E

shift-share analysis (mix and share analysis) chapter 7, pages 67-73 in textbook

Documents

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